A Liquid Alts ETF Idea for the Second Half

ETF Trends

U.S. stocks raced to another intraday record high Tuesday and while this bull market has its detractors, there appears to be more room to the upside.

However, some market observers believe valuations on U.S. stocks are high. That does not necessarily investors need to flee to cash, but now could be a good time to consider alternative investments.

“In the nontraditional income space, we see broad momentum tailwinds across all asset classes, but our income models tilt towards the bank loan, high-yield, preferred equities and mortgage REITs on a risk-adjusted yield basis,” Newfound Research Vice President Andrew Gogerty said in an interview with Investor’s Business Daily.

One idea that Gogerty currently likes is the newly minted PowerShares Multi-Strategy Alternative Portfolio (LALT) , which debuted at the end of May and now has $12.5 million in assets under management.

The actively managed LALT is a first-of-its-kind ETF designed to mute portfolio volatility while boosting risk-adjusted returns. LALT uses a long-short strategy.

LALT tracks a proprietary benchmark developed by Morgan Stanley (MS) that is comprised of quantitative, rules-based strategies. The benchmark seeks to capture non-tradition risk premia across multiple asset classes, including equities, bonds, currencies and volatility instruments. [New Multi-Strategy ETF Debuts]

LALT “allows investors to incorporate previously unavailable, institutional asset class strategies and complements the existing alternative long and short exposures,” Gogerty told IBD.

LALT which charges 0.95% per year, also long and short positions in G-10 currency forwards as well VIX index futures and a short position in equity index futures, according to PowerShares data. The new ETF also allocates about 45.4% of its weight to U.S. equities and almost 46% to equity index futures. Overall, LALT is home to 110 holdings.

Because LALT’s underlying index looks to generate returns from multiple sources, the ETF can serve as a portfolio diversifier in addition to being a risk reduction instrument.

PowerShares Multi-Strategy Alternative Portfolio

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lalt

Table Courtesy: PowerShares

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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